Online Brokers Hit By Fraudsters

Federal investigators are focusing on an uptick in identity fraud hitting customers of online brokers, including E*Trade and TD Ameritrade Holding Corp
.

E*Trade said during its third-quarter financial report that a surge in Web-based fraud forced the New York-based online broker to reimburse customers $18 million, and is drawing the attention of Securities and Exchange Commission and other regulatory agencies.

The identity theft allowed hackers to engage in so-called "pump-and-dump" schemes in which perpetrators used customer money to buy obscure stocks, then sell shares for a profit.

"E*Trade, like a number of our competitors, experienced a significant increase in losses resulting from fraud related to identity theft," E*Trade said. The fraud "has become a focus of the SEC and other regulatory agencies."